Asset finance lenders should become founding signatories to LSB’s Ethnic Minority-led Businesses Code

UK ethnic minority-led businesses are three times less likely than White British-led businesses to have their lending product applications accepted for the full amount, according to new research carried out for the UK Lending Standards Board (LSB) in March this year. While asset finance lending was not specifically covered by the LSB research, Asset Finance Connect’s (AFC) research, which also focused on increasing lending penetration among under-served segments including women-led and ethnic-minority businesses, suggests that many lenders have believed up-to-now that, because scorecards are blind to gender and ethnicity, their lending businesses are unlikely to make it harder for under-served groups to access finance. LSB research findings have demonstrated this belief is false.

“All businesses deserve equal opportunities to access financial services. Too often, some groups of businesses face barriers that financial services providers might not even realise exist – that’s certainly the case for ethnic minority-led businesses,” says Anna Roughley, Deputy Chief Executive of the LSB. “By building awareness of these barriers and committing to make changes, financial services providers can deliver better outcomes for businesses who, the data shows, tend to be more ambitious and planning to expand than others.

“One example barrier is that ethnic minority-led businesses sometimes have thinner credit files than others when seeking ‘mainstream’ finance for the first time. Rather than an issue with creditworthiness, this can be down to cultural attitudes to cash, or the important role that community finance can play in supporting these businesses in their early stages. An ethnic minority-led business might be creditworthy, but this can be missed by a lender who doesn’t understand the cultural context in which they operate.

“The difficulties that ethnic minority-led businesses face can mean they either can’t access the finance they need to grow, or they have to seek smaller amounts from multiple lenders. This can push these businesses towards sources of funding that might not be right for their needs. To help tackle the barriers they face, we’re launching a new Code to set and disseminate best practice on ethnic minority-led business access to financial services. By signing up, financial services providers can help unleash the potential of a key group of under-served businesses, building trust and boosting growth.”

Anna Roughley will encourage asset finance lenders at the AFC conference in London to join the Lending Standards Board’s new Access to Financial Services for Ethnic Minority-led Businesses Code which is due to be launched mid-June. Lenders who act now will be acknowledged as founding signatories to the Code. Through the Code, the LSB will work with signatories to reduce ethnic minority-led businesses’ barriers to financial products and services by ensuring these businesses have access to the right products and services at the right time; improve their awareness of ethnic minority-led businesses’ needs and ensure these are taken into account throughout the lifetime of customer relationships; and share best practice to improve outcomes for ethnic minority-led businesses across the financial services sector.

AFC is aware that some of its members already intend to sign up to the Code as founding signatories and expects more lenders will sign up after the June conference.

During the AFC Summer Conference on 3rd June at County Hall in London, attendees will be debating how to increase asset finance lending to SMEs. To inform the debate, AFC will release key research conducted with 15 of the UK’s leading asset finance lenders — and AFC corporate members — who attended an AFC workshop at Shoosmiths offices in London in April. The results will be considered in three conference sessions each focused on important elements of the debate: how to increase lenders appetite to lend; pain points in the SME lending customer journey; and opportunities to increase lending to market segments which are currently underserved (including lending to start-ups, women, and ethnic minority businesses).

Anna Roughley, Deputy Chief Executive of the LSB, will feature in the third of these three sessions. She will be interviewed by Christian Roelofs, CEO of Finativ and AFC’s asset finance community lead moderator.

Other interviewees in the SME stream include Richard Davies, CEO of Allica Bank; Jim Higginbotham, CEO of NACFB; and Richard Bearman, co-chief banking officer at the British Business Bank. Our lenders’ panel, who will comment on each of the interviews and ask questions, will feature Nova Everidge, head of asset finance for Metro Bank; and Sonia Gola, senior policy advisor asset finance at the FLA.

To find out more and book your place at the AFC UK Summer Conference on 3rd June at County Hall, London, visit the conference website.

Lenders who would like to talk with the LSB’s Anna Roughley about the opportunities to become founding signatories to the new Code can email her at annaroughley@lstdb.org.uk.